Joshua Oronce, a financial advisor with BTA Advisory Group’s Wealth Teams Alliance in Irvine, California, has worked with about 40 child care centers to help them reap the benefits of the Employee Retention Tax Credit, known as the ERC.
It’s a fully refundable payroll tax credit for employers who had to close, or partially close, their businesses due to COVID-19, as many child care centers did.
And while the deadline to apply is technically through 2024, Joshua says there’s no time to wait to apply for these funds.
“Act fast,” he said. “This is a first-come, first-serve credit with limited funding.”
He anticipates that by the end of September, more than half of the money available will have been applied for.
“I’m seeing more ads for it and people are becoming more aware of it,” Joshua said.
But, he said, many bookkeepers and accountants don’t really understand it and are incorrectly telling businesses they don’t qualify when in fact, they do.
“It really is a race against time to get the funding,” he said.
We asked him five questions that many child care providers have about the Employee Retention Tax Credit:
1: How does this credit affect owners of child care centers?
Since most child care centers across the country experienced one form of shutdown or a partial shutdown – either being fully closed, limited to essential workers only, having common areas closed down, not mixing classrooms or reduced student-teacher ratios – many of them are likely to qualify to receive money back from this tax credit program.
2: Which employees can businesses claim the ERC for, and can family members be claimed?
These credits are more so based on wages per employee and wages paid to all employees are eligible, except for any person owning 50% or more of the company and family members of an owner.
3: One ERC requirement is that owners show a “significant decline” in gross receipts to quality. What does that mean for child care providers?
For 2020, companies need to have experienced a 50% reduction in gross sales in any of quarters 2, 3 or 4 compared to the same quarters in 2019.
For 2021 companies need to have experienced a 20% reduction in gross sales in any of quarters 1, 2 or 3 compared to the same quarters in 2019.
NOTE: Only one of two the requirements (gross sales or shutdown/partial shutdown) need to be met to qualify … not both, which is a common misconception.
4: The terms of the ERC use the term “small employer.” What is the definition of a small employer for seeking this credit?
Less than 500 full time employees per entity. And the amount of wages eligible is up to $10,000 per employee.
5: Is the ERC taxable?
Yes, the Employee Retention Tax Credit is taxable. Income tax returns will need to be amended to reflect the credits received.
If you’re interested in learning if you qualify for the ERC program, you can schedule a time to speak with Joshua here or give him a call at 562-221-8238.
This tax credit was a topic at the recent Business of Child Care Conference hosted by Procare Solutions! You can watch an on-demand recording of that session here, as well as other on-demand presentations on topics ranging from rebuilding enrollment in the wake of the COVID-19 pandemic to creating strong onboarding plans to help you retain employees!